Documents

 

Australian Securities and Investments Commission, ASIC’s role in ensuring confidence is maintained in the financial system, tabled at public hearing on Wednesday, 5 August 2020 (PDF135KB).

ASIC

No. Member Question Hansard page
and Hearing date or
Written questions

Response

(Publication date)

ASIC01QON Falinski

CHAIR: We've gone through a number of matters in our hearing, with witnesses as part of this inquiry raising a series of questions that fall within the remit of ASIC. One of them was the recent appearance by IFS before this committee. Have you read that transcript or are you aware of that transcript?

Mr Shipton: I, personally, have not, but I will ask my colleague Commissioner Press if she has.

Ms Press: I have seen that transcript, yes.

CHAIR: There was follow-up media with people questioning whether IFS was acting consistent with the law. I'll read a brief bit of the transcript from. Mr Falinski asked:

Do you think the limited scope financial planners that you have can fulfil their best interest duties if they only give advice on superannuation?
Then the witness from IFS said:

Yes, we believe so. I know that some in the industry have thought that the advent of the best interest duty and the code of ethics might see the end of limited scope or intrafund advice. We believe there's absolutely a place for it. We have the benefit of licensing advisers that sit in both unlimited scope and in a holistic advice sense. It comes down to appropriate scoping and then understanding when you need to decline providing advice …

Mr Falinski then went on to ask whether they had consulted ASIC on this, and they said they had spoken to ASIC and they got the sign-off based on what was being said by ASIC at conferences. Can you give some clarity: has ASIC actually signed off on the approach?

Ms Press: We have not signed off on the statements of advice that are provided by IFS advisers. We have on several occasions said and continue to believe that scaled advice, of which intrafund is a component, is appropriate and is able to be delivered under the best interests duty. The delivery of intrafund advice is something that is allowable and defined by the SI(S) Act but still must meet the best interests duty and the other duties of a financial adviser.

CHAIR: Mr Falinski, do you have a follow-up question on this?

Mr FALINSKI: Yes, I do. What I don't understand about the approach that they're taking is how you can give personal advice if you're not asking about a person's personal circumstances.

Ms Press: The intrafund advice that we're talking about is very limited in its scope, and it's limited scope advice.

Mr FALINSKI: I'm utterly confused by this. When does limited personal advice become personal advice?

Ms Press: Intrafund advice does take into consideration some personal circumstances, but it is limited in its scope, and that limitation in its scope is defined by the statement of advice.

Mr FALINSKI: So then wouldn't the consumer assume that they're getting personal advice?

Ms Press: They are getting—

Mr FALINSKI: The law is meant to be applied as to what a reasonable person would assume that they are [inaudible] and how that is presented. It seems to me that they're being presented with personal advice and it's not being made clear to them in any way, shape or form that it's general advice. And now there seems to be this hybrid kind of advice which is limited personal advice, which I didn't know existed at all.

Ms Press: So, to be clear, intrafund advice is personal advice; it is not general advice. It is subject to—

Mr FALINSKI: So then why weren't they providing that under the general advice provisions?

Ms Press: They're not providing it under the general advice provisions. They're providing it under the provision of the intrafund carve-out in the SI(S)Act, which is a matter for government to allow that.

Mr FALINSKI: I know many union backed publications reflect on my intelligence, but can I be blunt and say to you that I really don't understand what it is that is going on here. I believe you to be a competent, reasonable, intelligent person who is across the law, and you can't explain this to me in a manner and form that makes sense.

Ms Press: Well, I apologise that it doesn't make sense to you.

Mr FALINSKI: No, I don't mean it's your fault—

Ms Press: Intrafund advice is personal advice. It is subject to a statement of advice.

CHAIR: Sorry, I'm going to interrupt here. What I think would be useful is that, if ASIC could reflect on the transcript of the hearing, it could give a reflection on the transcript of this hearing as well and provide a formal written advice to this committee about the consistency between the position that IFS has taken and the issues and matters that Mr Falinski has raised, because there is clearly a lack of clarity about the extent to which certain types of advice can be provided.

Hansard, pp. 4-5
5 August 2020
(14 September 2020)
(PDF158KB)
ASIC02QON Falinski Mr FALINSKI: You initially said, to questions that the deputy chair of our committee asked, that total remediation was about $2.8 billion and that about $800 million had been paid out. Is that right?

Ms Chester: That's right. Of the 89 active remediations that we're oversighting, there's about $2.9 billion still to be paid out. In that figure of $2.9 billion, there is a number for fee-for-no-service. I might take that question on notice because I'm having trouble locating the exact number for you and I do not want to waste the time of the committee or give you a wrong number.
Hansard, p. 9
5 August 2020
(14 September 2020)
(PDF66KB)
ASIC03QON Falinski

Mr FALINSKI: As part of your COVID-19 plan, to what extent have notices slowed down as a result? To give context, in March 2020 you guys issued a statement saying that you're recalibrating your regulatory priorities to focus on COVID-19 challenges. As part of that statement, you said:

In issuing information-gathering notices, ASIC has provided new guidance to our staff – mindful that many notice recipients may be facing significant disruption.
By taking these actions, industry participants will be better placed to focus on their immediate priorities and the needs of their customers at this difficult time.

My question, in that context, is: to what extent have the notices slowed down?

Mr Shipton: I can confirm that those notices have slowed down. For instance, in our Close and Continuous Monitoring Program there has been a decline in the onsite supervision and notice utilisation. I don't have the figures to hand, but we can take that on notice if you wanted to get some statistical analysis here. I will also ask my colleague, Deputy Chair Crennan, to make any observations on the enforcements.

Mr Crennan: I would just add that there are a number of aspects of the operation of the office of [inaudible] issuing of notices, which you've referred to. That's been [inaudible]. We are not in a position to give you precise numbers or a graph or anything, but we'll take that on notice and endeavour to get back to you quickly. So too with the section 19 examinations—we have been persevering with them similar to these types of circumstances—and other interactions with the larger entities in particular in circumstances where we, for example, issue 912C notices where an entity can effectively write a report for us and all those sorts of things. So we've explored as many strategies as we can that are efficient and sensitive to the current economic environment such that we can continue to enforce the law, continue to investigate possible contraventions of the law, without overburdening the regulated communities but without stopping the office of influence from its operations in any significant way. I hope that's helpful, but we'll get back to you with the precise details.

Hansard, p. 11
5 August 2020
(14 September 2020)
(PDF88KB)
ASIC04QON Aly Dr ALY: In the document that you tabled with the committee you've got some examples of your role during COVID-19, one of which is warning against scams. You mention people offering to help access superannuation or high-return investment opportunities and you say there has been a 20 per cent increase in reports of misconduct. Do you have any further detail about how many reports have been made around misconduct or around people charging high fees for offering to access superannuation? Do you have more detail about what people are charging to help people access superannuation and the demographics of that? Who are they targeting with these scams?

Mr Shipton: We do follow a number of data points in relation to these scams in other reports. My colleague Warren Day, who is online, is in charge of the area responsible for monitoring these complaints and data. I will ask him to provide any further particulars that he has to hand.

Mr Day: Thank you, Dr Aly; that's a really good question. As the opening statement indicated, we are seeing a number of unsolicited contacts by certain parties offering to assist in accessing the early release scheme for a fee. Often that can come also through texts, emails and social media. We've seen reported to us some social media accounts impersonating government bodies. They are also seeking personal details such as bank accounts, superannuation funds and insurance. In relation to your question about the numbers, I don't have that information to hand broken down for that subgroup, but I can take that on notice and give you an answer in due course.

Dr ALY: Yes, could you please take it on notice to provide a number of points of information, including how many complaints you've had in that regard and, if you have any estimate of the extent to which people are being contacted and charged fees for accessing their early superannuation, the cost that they're being charged. Is it an exorbitant amount that people are being charged to access their superannuation? If you have any demographic information—whether they are targeting mostly women or mostly young people—that would be useful as well. Thank you.
Hansard, p. 12
5 August 2020
(14 September 2020)
(PDF77KB)
ASIC05QON Mulino Dr MULINO: I'll follow up with some questions on notice on this, but I agree with you that individuals referring to advice like the moneysmart calculator or a financial adviser or something along those lines would be very useful. My concern is that the bar for accessing this scheme is so low that I doubt whether, in many instances, that kind of advice is in people's minds. I have a couple of quick questions on the Westpac probe. Could you give me an update on the money-laundering probe?

Mr Shipton: My colleague, Mr Crennan, can supplement. There's not much we can say because matters are continuing to be investigated, but I'll ask if Mr Crennan has any supplements.

Mr Crennan: As I've said in other fora, the investigation is being expedited as best it can during these circumstances. The investigation did commence very shortly after the statement of claim was filed by AUSTRAC in the Federal Court, and we are using external resources to further accelerate the investigation. But I can't say much more than that.

Dr MULINO: That's fine. I understand that you're not going to be able to put a timeline on this. Given the importance of the issues that have been flagged in this particular case and the scale of the breaches, a three-year time line along the lines that we saw with the CBA would be concerning. Are you able to give any guidance on whether you've devoted additional resources to this? In particular, have you any indication as to whether additional IT and analytical capacity is going to enable you to expedite this, and have you invested in that kind of capability in your efforts to prosecute this case?

Mr Crennan: We have devoted extra resources to this investigation for reasons that ought be fairly obvious. We have certainly devoted [inaudible] resources on briefing barristers at an early stage of the investigation, which wouldn't necessarily ordinarily be the case. In terms of the IT question, I would have to take that on notice. I don't feel like I can give a perfect answer now, but I do know that, generally speaking, we've put extra resources into the investigation. I assume that that percolates throughout [inaudible], but I'm not certain.
Hansard, p. 14
5 August 2020
(14 September 2020)
(PDF70KB)
ASIC06QON Wilson CHAIR: We've got to move on to APRA, but I have a couple of quick questions which I think are important. Has ASIC ever done an audit of its employees and of how many used to work for the superannuation sector?

Mr Shipton: I'm not aware that we have done an audit of that but I'm certainly aware that a number of staff have superannuation and other industry experience. If there's a particular question or statistic you're after, we can certainly take it on notice.

CHAIR: You can put the answer on notice. I'm interested in the number of employees who used to work in the super sector. Then break it down to the retail and the industry super sector. Obviously, in some sectors there will be both.
Hansard, p. 15
5 August 2020
(14 September 2020)
(PDF89KB)
ASIC07QW Leigh

This year, the ASX issued a class waiver, permitting listed firms to raise up to 25 per cent of new equity on a non-pro-rata basis (up from 15 per cent normally).

a) Please provide a full list of the instances in which this rule has been relied upon (i.e. non-pro-rata equity raisings above 15 per cent), providing for each: name, date, and amount raised.

b) What is the proportion of total capital raised that went to new shareholders versus existing shareholders?

c) What proportion of the total amount raised went to recipients who received more than their notional pro rata entitlements under the new placement regime?

d) What consultation did the ASX undertake with ASIC prior to the issuance of this class waiver?

e) What consultation did the ASX undertake with ASIC prior to the recent extension of this class waiver from July 2020 to November 2020?

f) Did ASIC support the recent extension of this class waiver from July 2020 to November 2020? If so, what evidence did you rely on in making that decision?

g) Can ASIC quantify the cost of dilution to retail shareholders of ASX companies across all raising types (not just those relying on the new class waiver) since the new class waiver was introduced?

Written 

Responses to
questions 7 - 10

(14 September 2020)
(PDF244KB)

ASIC08QW Leigh

ASIC received special funding of AUD6.8 million in the 2019 budget for a corporate governance taskforce.

a. Of this funding, how much was spent on consultants?

b. What deliverables were produced?

c. What measurable impact has it had on corporate governance?

Written   
ASIC09QW Leigh In June of this year Matt Thistlethwaite MP wrote to Mr Shipton to raise and the issue of 42 per cent premium increases with Comminsure products in the Colonial Super Retirement Fund.

a. The correspondence raised an individual matter which has not yet been responded to. When will this be responded to?

In general terms the correspondence raised the following issue: Colonial Super Retirement Fund has issued on of its members with AUD500,000 worth of cover under a group term life insurance policy a policy increases from AUD5,494 to AUD7,804 per annum. I understand the policy contains reasonably standard group insurance provisions. The fund trustees have written to their members explaining that they have entered into a contract with the same insurer for another three years. I understand that Colonial Super Retirement Fund and its group insurance providers are related entities. To put this into perspective, a similar policy of age and quantum available to a member of Australian Super would be around AUD4,350 per year.

b. Does ASIC see any issue with the above scenario as described?

c. Under the circumstances does ASIC believe the trustees of this fund are acting in the best interests of the fund’s members?

d. Will ASIC undertake to investigate this matter?
Written  
ASIC10QW Leigh

The following questions relate to the collapse of Pasminco and its placement into voluntary administration in 2001.

a. Does ASIC believe that the directors of Pasminco in all the circumstances of the matter correctly discharged their duties to creditors and shareholders of Pasminco when they appointed administrators?

b. Did the directors of Pasminco take all steps to mitigate any loss by shareholders, such as to avoid the need for appointment of any administrators?

c. Following the administration process Pasminco became Zinifex Limited. The Shareholders of the former entity received nothing from the process while the 39 banking industry shareholders made significant profits from the debt they held. Has ASIC ever investigated the legality of this outcome in relation to investors?

d. Is it ASIC’s belief that the directors of Pasminco were appropriately fulfilling their directors’ and officers’ duties under general law and pursuant to the Corporations Act 2001 including:

i. acting with care and diligence;

ii. acting in good faith, in the interest of the company and for a proper purpose;

iii. not using the position of director improperly;

iv. not improperly using information that gain during the course of carrying out duties as a director;

v. avoiding conflicts of interest;

vi. keeping records about the financial position of the company.      

Written  
ASIC11QW Leigh On 7 July 2020, ASIC informed listed entities that: ‘Entities should appropriately account for each type of support and assistance from government, lenders, landlords and others. Both the financial report and OFR should prominently disclose significant amounts, the commencement date and expected duration of support or assistance. Examples include JobKeeper, land tax relief, loan deferrals and restructuring, and rent deferrals and waivers.’ (20 157MR)

I note that some firms have not separately identified their receipt of JobKeeper, but have instead reported the amount in conjunction with similar support provided by other jurisdictions. For example, Dominos stated that it received support of $3.2m from France, New Zealand and Australia but did not say how much from where. Similarly, IDP Education received a total of $4.464m from Australia and other jurisdictions but again did not disclose how much from where.

Does ASIC consider that this level of disclosure matches its statement of 7 July 2020? If so, please explain how this could be consistent with a requirement to disclose ‘each type of support’. If not, what actions has ASIC taken to ensure proper compliance?
Written  (22 October 2020)
(PDF107KB)
ASIC12QW Leigh

ASIC’s first Consultation Paper proposing reforms on the sale of insurance in car yards was released three years ago, and its Original Instrument was released for consultation 10 months ago. ASIC is proposing a 9 month delay for the main operative section in the New Instrument (Section 6).

(a) What has caused this delay? Why is it necessary in ASIC’s view?

(b) What calculations have ASIC done to gauge the impact of the altered timeline on consumers?

(c) Can ASIC guarantee there won’t be further delays after 9 months?

(d) What would be the cost of acting sooner?

Written (7 October 2020)
(PDF104KB)
ASIC13QW Leigh The following questions relate to ASIC’s decision not to appeal the Westpac ‘Wagyu and Shiraz’ lending case:

(a) What pros and cons did ASIC consider in its decision not to appeal?

(b) What percentage of past cases has ASIC appealed?

(c) Does ASIC see appeal as the default option when litigation is unsuccessful? What does ASIC consider in making this decision?

(d) Does ASIC think there are any potential negative impacts that may arise from the decision not to litigate in this instance?

(e) What steps is ASIC taking to mitigate any of these negative impacts? In particular, what steps is ASIC taking to respond to concerns that it will lead to poorer quality lending decisions?
Written (22 October 2020)
(PDF67KB)
ASIC14QW Leigh On Wednesday 5 August 2020 in the House Economics Committee Hearing, ASIC flagged concerns with the Buy-Now Pay-Later Sector and its potential to harm consumers, and indicated a report into this sector would be available by the third quarter of this year (Source: Handsard). 

(a) When will this report be released?

(b) Did the initial terms for the report indicate that it should reach a position on regulation for the sector?

(c) What are ASIC’s aims in making the report?
Written (7 October 2020)
(PDF77KB)
ASIC15QW Leigh In May 2020, ASIC announced it would defer the commencement date of the mortgage broker best interest duty and remuneration reforms, and the design and distribution obligations, for six months from their original commencement dates given the impact of COVID 19 (Source: ASIC).

(a) Why is this delay necessary in ASIC’s view?

(b) What are the benefits and harms to consumers of this deferral?

(c) What calculations have ASIC done to gauge the impact that the altered timeline will have on consumers?

(d) What would be the cost of acting sooner?

(e) In considering this deferral, and any possibility of further deferrals, has ASIC determined a threshold where the cost to consumers of delay becomes unacceptable?
Written (22 October 2020)
(PDF79KB)
ASIC16QW Leigh ASIC used its product intervention power to ban a short-term lending model that caused significant consumer detriment used by Cigno (Source: ASIC).

(a) Has ASIC done any calculations regarding the cost of this model to affected consumers?

(b) What is ASIC doing to ensure redress for affected consumers?

(c) Did ASIC’s intervention include any agreed standards Cigno would be required to meet with future lending models – does intervention lead to routine ‘health checks’ against future lending behaviour.
Written (7 October 2020)
(PDF127KB)
ASIC17QW Falinski

ASIC Report 413 Review of retail life insurance advice found that 37 per cent of consumers received advice that failed to meet the relevant legal standard that applied when the advice was given. It also found that the way an advisor was paid had a statistically significant bearing on the likelihood of their client receiving advice that did not comply with the law (pp. 6-7).

(a) Was the decision to implement the life insurance advice reforms based solely on the findings of this report?

(b) Report 413 found that upfront commission models represent an incentive for advisers to give product replacement advice to clients with existing arrangements, often referred to as ‘churn’. How does ‘churn’ impact consumers?

(c) Has ASIC conducted research into the impact of different remuneration structures on clients receiving compliant advice following the introduction of the life insurance financial advice reforms? If so, please provide a copy of the research.

(d) Did this research find life insurance ‘churn’ to be a major issue in Australia? If not, do you believe that this is due to the new regulatory framework?

Written (22 October 2020)
(PDF148KB)
ASIC18QW Falinski Is ASIC’s aim to make financial advice more affordable and accessible for Australian consumers?

(a) If so, how would you rate ASIC’s performance in achieving this?

(b) Has ASIC engaged an independent consultant to analyse the impact of additional regulation on the financial advice sector? If so, please provide details of the analysis including the name of the firm that conducted it; the selection/tender process; the outcome of the analysis; and a copy of the report.
Written (22 October 2020)
(PDF63KB)
ASIC19QW Falinski Is ASIC working collaboratively with the financial advice sector to improve the provision of advice?

(a) Please outline ASIC’s consultation process to date. Is consultation ongoing?

(b) How does ASIC ensure that its engagement with the sector is effective?

(c) What feedback has ASIC received from financial advisors regarding this process? Has ASIC conducted a survey to determine financial advisers’ satisfaction with the consultation process?
Written (22 October 2020)
(PDF121KB)
ASIC20QW Falinski  Is the new regulatory framework for financial advisers focused on prosecuting wrongdoers rather than encouraging and supporting good outcomes for consumers?

(a) What is your view on comments that ASIC’s approach is too punitive?
Written (11 November 2020)
(PDF60KB)
ASIC21QW Falinski An article in The Australian ‘ASIC acts on funds misrepresentation’, 23 September 2020, reported that ASIC has required responsible entities to change the names and labelling of funds. Is there evidence to suggest that the name of an investment product significantly impacts a consumer’s decision to purchase the product? Written (11 November 2020)
(PDF64KB)
ASIC22QW Falinski

Articles in the Australian Financial Review, (‘Industry Super gets “please explain” notice from treasury’, 28 April 2020; and ‘Industry Super admits modelling bungle and probe’, 14 May 2020) reported that Industry Super Australia’s ‘super calculators’ were found to produce significantly higher estimated impacts of withdrawals under the early access scheme than those produced by the ASIC calculator.

(a) It was reported that ‘ASIC has confirmed it wrote to ISA on April 20 due to concerns that “contrary to the ASIC principles, the ISA modelling did not use the same assumptions as the generic calculator on the ISA website”’.

(i) Has ASIC received a response from ISA to this correspondence?

(ii) Is ASIC satisfied with ISA’s response? Does ASIC consider the matter resolved?

A recent article in the Australian Financial Review ‘Guardian too credulous on super calculators’, 24 September 2020, reported that ISA’s ‘super calculator’ regarding the impact of scrapping the planned superannuation increase was being promoted to consumers in the media.

(b) Considering the past issues with ISA super calculators, is ASIC concerned that this calculator may not be accurate and may mislead consumers?

(c) What is ASIC doing to ensure that ‘super calculators’ cannot be used to mislead consumers?

Written (22 October 2020)
(PDF94KB)
ASIC23QW Falinski At the House Economics Committee public hearing on 30 June 2020, Industry Fund Services (IFS) was asked how its ‘limited scope’ financial planners could be compliant with the best interests duty, if their financial planners can only give advice on superannuation. IFS told the committee that it was confident that it is possible to provide limited advice and also comply with the best interests duty. IFS advised that ASIC agreed with this position.

(a) What is ASIC’s view on limited scope financial advice? Does ASIC believe that it is possible to provide appropriate and compliant financial advice when only considering a limited aspect of an individual’s financial needs and goals?

In its response to a question on notice from that hearing IFS stated that:

ASIC’s Report 639 Financial advice by superannuation funds examined a sample of intra-fund and scaled advice provided by superannuation funds. The majority of that advice was compliant with s961B, 961G and 961J of the Corporations Act. ASIC provided additional tips to trustees and advice providers to ensure compliant scaled advice and Intra-fund advice. (IFS02QON)

However, ASIC Report 639 found that the overall pass rate for intra-fund and scaled advice was 56 per cent (pp. 31-32). Whilst this is a majority (i.e. greater than 50 per cent), it is hardly an outstanding performance.

When ASIC’s Report 413 Review of retail life insurance advice revealed a 37 per cent failure rate, there was outrage and the introduction of a life insurance reform package.

(b) What is ASIC’s view of the low overall compliancy pass rates for financial advice provided by superannuation funds?

(c) Has ASIC taken action against any funds as a result of these findings? Does it plan to?

(d) How does ASIC ensure that it can exercise its regulatory duties without favour and in an impartial way?
Written (22 October 2020)
(PDF91KB)
ASIC26QON Hammond  Ms HAMMOND: I just wanted to ask a question as to whether the internal audit has at any stage focused on travel or remuneration.

Ms Armour: I think we would have to take that on notice to have a look back at all our internal audit reviews. We have a rolling program that looks at a range of measures. For example, we recently considered procurement and some other relevant matters, so I think we'd have to take that on notice and come back to you.
Hansard, p. 29
23 October 2020
(11 November 2020)
(PDF60KB)
ASIC27QON Mulino Dr MULINO: Yes. To follow up on the communication between I think it was the ANAO and the Treasurer, did you say that was on 13 September?

Ms Chester: No, it was on 15 September that the email was sent to the Treasurer from the—

Dr MULINO: Were you copied in on that?

Ms Chester: Our CFO was copied in on it and shared it contemporaneously with Mr Shipton.

Dr MULINO: Are you able to share that with us?

Ms Chester: I'll need to take that on notice, given it was a communication from the ANAO to the Treasurer that we were copied in on.

Dr MULINO: Thank you.
Hansard, p. 31
23 October 2020
(11 November 2020)
(PDF60KB)
ASIC28QON Wilson

CHAIR: … We've raised this matter before you as well, which is on superannuation funds when, as you may recall earlier in the year, there was a bottoming out of the Australian Stock Exchange as a consequence of COVID-19. Then there was a delayed period, in many cases, where super funds had unlisted assets for revaluation that enabled people to move money about from within funds based on knowledge or inside information to potentially profit. I asked a series of questions of superannuation funds, and this seems to me to be quasi-insider trading, if it does occur.

We asked about the switching behaviour of executives and trustees of superannuation funds across Australia, and we got a number of different responses. Say, for instance, CareSuper, who I give credit to. In answer to, 'What volume of switching between funds occurred in that time by trustees of the fund that are also members of the fund, between the highest and lowest valuations,' their answer was:

Investment choices of individuals are treated with confidence.However, CareSuper has in place a comprehensive Conflicts Management Policy. This Conflicts Management Policy requires that 'blackout' periods are declared and enforced such that any director, executive or member of staff who was aware of any advance or sensitive information on valuations is prohibited from switching for the duration of the period. Black-out periods were enforced at various times in the six months from 1 January 2020 to 30 June 2020.

I give them credit, and I'll table that evidence, as answered as a question on notice.

I'll go to other funds. For instance, I believe UniSuper have admitted that one member, who is also an executive of the fund, had one or more switch requests processed during the high load periods of their fund to a total value of $445,368. I'll table that one. We then have other funds where we see other issues similarly occurring. AustralianSuper had one person who did a transaction during that time. I'll table that one. We have Cbus, who refuses to provide any information to us, which is interesting. We then have NGS Super. They have outlined that they have trustees who did major transactions—three of them, in fact—during that time. I'll table that one as well. Then we have Rest. Rest has a person who transacted $465,949 in funds. I'll table that one as well. You can see the pattern of behaviour. We have people who are trustees or managers of funds transacting huge sums of money within a defined period, where it's known that the stock market may not have reached bottom—we have to concede that—but had dropped considerably while they hadn't revalued their unlisted assets and therefore may have been able to secure a benefit. Is that the sort of thing that ASIC would investigate?

Ms Press: We would be happy to take those examples away and investigate them, yes.

Mr Wilson has provided the following responses to questions in writing from superannuation funds for this question:

REST111QW
NGS96QW
CBUS98QW
AS103QW
CARE96QW

Hansard, pp. 31- 32
23 October 2020
(11 November 2020)
(PDF130KB)
ASIC29QON Wilson  CHAIR: There are a couple of matters—and I've raised this previously with the stood-aside chair, Mr Shipton—about the use or misuse of ad words in the context of superannuation funds. We raised a particular example from 2014 where ASIC issued a fine to BT for misleading, or seeming to have misled, regarding its advertising. I'd like to table with the secretariat, to be submitted to ASIC, material from some funds that have also been doing the same thing and using misleading terms. We can put that as a question on notice. Would you investigate that? Is that something you're prepared to do?

Ms Chester: Chair, can I intervene just for one moment, please, and ask if we could extend the professional courtesy now of excusing Mr Shipton from the proceedings, given he's answered the questions that you had related to the ANAO matter.

CHAIR: Yes, I think that's fair. You are excused, Mr Shipton. My apologies.

Ms Chester: Thank you. Chair, on the matter that you've raised, I'll hand across to my commissioner colleague Danielle Press.

Ms Press: Yes, we'd be happy to look at any instances of funds where you believe that there has been misrepresentation.

The Chair has provided the questions asked of superannuation funds in relation to their use of Google Ad Words and an example of a possible breach of standards previously imposed by ASIC: Please see Attachment A
Hansard, p. 32
23 October 2020
(11 November 2020)
(PDF70KB)

Attachment A
(PDF396KB)
ASIC30QON Wilson  CHAIR: We know in the royal commission, TWUSUPER paid officials $150,000 a year to encourage employees to sign up to their super fund. So would that be considered the basis of financial advice, or have you not reviewed the royal commission's report?

Ms Press: I have reviewed the royal commission's report. I will need to take that one back on notice. I'm sorry; I'm not 100 percent sure. I don't believe I can comment today on whether or not it is financial advice without looking at the specifics of the matter.

CHAIR: Okay. So you will look at it and come back to us on notice?

Ms Chester: Chair, that was not a matter or a case study that was referred to ASIC—so subject to the royal commission. It was up to the royal commissioner to decide whether or not he thought there was any potential misconduct. So the issue that you've raised, from my recollection, was not a case study. It was not a matter that was referred to us for action. So I think that that's a matter for the public record.

CHAIR: But that doesn't change the fact that I'm asking about that—and you'll take the question on notice and come back to us.
Hansard, p. 33
23 October 2020
(11 November 2020)
(PDF64KB)
ASIC31QON Leigh  Dr LEIGH: Thanks very much, Chair. Ms Chester, I want to start with the issue that was raised by a couple of my colleagues around common ownership. Given Australia's pretty opaque share registry, the only way in which we really get to see common owners is when they lodge substantial holding disclosures. But the threshold for that is currently five per cent. Has ASIC given thought to reducing that threshold, particularly in light of the fact that, in the United States, an entity holding more than $100 million in assets is required to make full disclosure?

Ms Court: Thanks for the question, Deputy Chair. I'll hand across to my fellow colleague Commissioner Cathie Armour.

Ms Armour: The substantial shareholding threshold is set by the parliament. It is not a threshold that—

Dr LEIGH: Yes, I know that.

Ms Armour: We think it's a very important matter that there's adequate transparency of substantial shareholding.

Dr LEIGH: Yes, I know that too. Have you given thought to reducing it?

Ms Armour: We have not made any recommendations about the substantial shareholding level, at least recently.

Dr LEIGH: That wasn't my question. I'm asking you a high-level policy question. You are a key regulator in this space. Common ownership is an issue which is concerning people across the parliament. Have you turned your mind to the question as to whether we might better understand the anti-competitive effects of common ownership if we brought down that five per cent threshold?

Ms Armour: Just to be clear that we're sort of talking about the same things and I'm not misunderstanding you, the substantial shareholding laws apply when somebody has a relevant interest. So that does pick up connections between parties. Whether that degree of connection is sufficient for the areas that you're concerned about, I think is an important question at the moment. At the moment, we haven't had a matter come to us that suggests there's a problem in this area. We'd be happy to look at anything in particular that you'd like to raise with us on that.

Dr LEIGH: It's a burgeoning international literature. There are papers suggesting impacts on consumers in the airline sector and in the banking sector in the United States. But all of this research is enabled by researchers having a clear understanding of the shareholders, and, as Ms Hammond pointed out beforehand, understanding the shareholders who might carry the most weight when they vote. I'd urge you to look into the issue and come back to us with a more substantive response.
Hansard, p. 34
23 October 2020
(11 November 2020)
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ASIC32QON Leigh  Dr LEIGH: Let me go to one of those particular issues. Annual reports frequently contain inaccurate information on substantial shareholders. Do you pay any heed to the substantial shareholders listed in annual reports?

Ms Armour: We conduct routine surveillance of annual reports and other disclosures. We are very keen to ensure that there are adequate disclosures of substantial shareholding. We are running a criminal case with the CDPP at the moment in relation to the adequacy of a substantial shareholding disclosure.

Dr LEIGH: Have you ever taken action against a company which had a misstatement of substantial shareholders in its annual report?

Ms Armour: I would have to take that on notice and come back to you, because 'ever' is a long time!
Hansard, p. 34
23 October 2020
(11 November 2020)
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ASIC33QON Leigh  Dr LEIGH: Ms Chester—and feel free to pass this on to others—section 205D of the Corporations Act requires persons to formally provide their residential address for the purpose of a notice or application, unless it would put at risk their personal safety or the personal safety of members of their families. What are the criteria that ASIC uses to determine someone's safety or the safety of their family? Is it based on their wealth?

Ms Chester: Thank you for the question. I'll hand across to my colleague Rosanne Bell.

Ms Bell: I look after ASIC's registry business. I can tell you that, in terms of the Corporations Act, where a person wishes to ask they can have their personal address suppressed on our corporations register. The criteria for having it suppressed are that you need to have a silent-elector status on the Electoral Commission roll, a court order or a police report. Otherwise we can look at individual circumstances along the way. There's another situation in our business names register where, if you're a sole trader and you operate a business out of your personal residential address, we will suppress your residential address automatically without a request being manually assessed by us.

Dr LEIGH: I don't recall the rules around becoming a silent elector. Can anyone become a silent elector?

Unidentified speaker: No.

Dr LEIGH: You're effectively outsourcing that decision to the Australian Electoral Commission, then, aren't you? What are their criteria?

Ms Bell: I'm sorry; I don't know their criteria. We will have to go and check that. However, yes, we would take their judgement call on that. But if they had matters outside of that which were relevant to us, such as a court order, a police report or other justifiable reasons for which they wanted it to be suppressed, we would manually consider that and make a decision.
Hansard, pp. 35 - 36
23 October 2020
(11 November 2020)
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ASIC34QON Leigh  Dr LEIGH: You were quoted in the Financial Review in a piece by Aleks Vickovich and Michael Roddan on 21 August 2020, anticipating a flurry of cases to come from ASIC before the end of 2020. How many more cases does ASIC intend to file before the end of the year as part of your so called litigation blitz?

Mr Crennan: Thank you for the question. I'm not sure that 'litigation blitz' was something I said. Nevertheless, we have issued a number of cases just recently against all sorts of entities and individuals. By the end of this year—I can't give you a number with precision, but I could take it on notice. It would still be an estimation. The conclusion of investigations under section 13 of the ASIC Act results in the decision-making process either within the executive or in significant matters at commission level. Those decisions happen periodically, so it really depends upon the executive bringing those decisions to either the commission or to themselves. I can't predict with precision when they'll be. We do have target dates and whether we meet them or not is a matter for how that investigation is completed.
Hansard, p. 37
23 October 2020
(11 November 2020)
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ASIC35QON Mulino Dr MULINO: I have a couple of questions around Crown directors' duties, and in particular some of the evidence that's coming out in the NSW Independent Liquor and Gaming Authority inquiry. Given that former chairman of Crown Robert Rankin has refused to give evidence, as I understand it, at that inquiry, what can ASIC do given that he is now based in the UK? What is ASIC planning to do?

Ms Armour: We are following the inquiry that is occurring, and we're aware of the matter you're mentioning. We have seen the reports that there may, potentially, be a referral to us in relation to that matter. We intend to keep following the matter, make our own inquiries, and, as often happens when there are inquiries by other forums—for example, the most obvious one more recently was the financial services royal commission—if there is a referral made to us, we, of course, would go and investigate the matter further. But that's not to say we won't look at the issues that I think you're referring to more generally in relation to the company if we see an issue that is of concern to us in connection with the inquiry, in any event.

Dr MULINO: But even if there isn't a referral, if there's a gap in evidence, there might be options for ASIC to pursue.

Ms Armour: There may well be; we are following the matter.

Dr MULINO: Has ASIC spoken to any Crown directors this year or made any inquiries in relation to it?

Ms Armour: If you don't mind, our approach is not to comment on matters that we may be considering in a broader investigative sense. So we'd prefer not to make any comments, if you don't mind, at this stage.

Dr MULINO: But it's fair to say that prima facie there are some very disturbing developments?

Ms Armour: We're certainly very alive to the matters that have been covered by that inquiry. Yes, we are watching that carefully.

Dr MULINO: Had you been investigating Crown before the New South Wales inquiry?

Ms Armour: What we would like to do, with your indulgence, is take the approach that we take in a number of matters—that is, actually not comment on specifics of matters because it can be unintentionally prejudicial for us to get into the specifics of particular matters. So, if you don't mind, we would prefer not to comment further at this stage.

Dr MULINO: So can I take it from that, though, that you don't want to make comments at this point because you want to retain the option of proactively intervening if you see fit and you don't want to prejudice that?

Ms Armour: No, I think if you just take it that it's not appropriate at this stage for us to make any comment. We are absolutely aware of the merits you're referring to, but going into details of what we may or may not be doing is something that we don't think appropriate to make a public. It's consistent with our general practice in relation to similar matters, so that's why we are asking for your indulgence on that.

Dr MULINO: I look forward to hearing you. It would be good if you could provide detailed information in relation to this in between now and the next hearings, which may be some time off, given that this is quite a fast moving process in New South Wales and given that there could be some gaps there, that it might require further action.
Hansard, pp. 39 - 40
23 October 2020
(11 November 2020)
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ASIC36QON Mulino  Dr MULINO: … I'm just wondering if you could provide an update on where the implementation of the royal commission's anti-hawking legislation is up to.

Ms Chester: I'll take that question. As you'd be aware, the government announced during the COVID-19 period that there was going to be a six-month delay with implementation for the legislation that was yet to enter the House. With respect to the anti-hawking provisions, they were caught up in those delays and, as we understand it, the government is on track for the exposure drafts and the new legislation to enter the House by the end of this year.

Dr MULINO: Do you see the potential for anti-hawking to interact with the stapling measures that have been proposed?

Ms Chester: Can you expand on how you would see them interacting, Dr Mulino?

Dr MULINO: For example, if anti-hawking wasn't strong enough, you could potentially see people put into products that weren't suitable that they're then stapled to. Obviously, we haven't seen all the details of the stapling measures, but I'm just wondering again—

Ms Chester: So the stapling measures relate to when somebody has defaulted into a super account, so there wouldn't be hawking involved. I might pause there and see if Commissioner Danielle Press has anything further to add to that.

Ms Press
: I don't actually see the connection between stapling and anti-hawking. As Deputy Chair Chester said, the stapling is really when someone's been defaulted into the fund. However, I'd be happy to take it on notice and come back to you, if possible, because I'm struggling to see the connection.
Hansard, pp. 40 - 41
23 October 2020
(11 November 2020)
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ASIC37QON Murphy  Ms MURPHY: … Is the commission seeing any trends in company disclosure? Are companies doing what they need to do in monitoring climate risks or accounting, I should say, for climate risks?

Mr Yanco: We're seeing a trend towards more companies taking this into account. However, we have identified some companies that need to do more work in this area. Generally the trend is upward but there are companies that need to do more work. As Commissioner Armour said, we're reviewing that fairly regularly.

Ms MURPHY: Is there a particular industry where you see the companies that need to do more work? You can take that on notice if you need to.

Ms Armour: Perhaps we should take that on notice, if that's okay. We are also starting to have a little bit a look to see whether or not there are any issues with what's called greenwashing in relation to the sale or promotion of financial products. So we are conscious that could be a potential issue as well that we need to look at.
Hansard, p. 43
23 October 2020
(11 November 2020)
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ASIC38QON Wilson  CHAIR: Mr Shipton had tax advice paid for him by ASIC due to his relocation from the United States to Australia. Is that correct?

Ms Chester: That's correct.

CHAIR: Did that include straight financial advice, or did it also include penalty notices or other types of costs which were not related solely to tax advice?

Ms Chester: I'm not aware of it involving any penalty notices. I think the details of the invoices related to the taxation payments are in the section 26 letter, which I understand is the subject of disclosure by the Treasurer. Sorry, but I'm yet to see the press release to confirm that.

CHAIR: It's just that I've received a document which raises questions about whether there was some late filing of taxation returns.

Ms Chester: There was a late filing. I will need to take on notice whether the payments related to any penalties related to that late filing.
Hansard, pp. 44 - 45
23 October 2020
(11 November 2020)
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ASIC39QON Leigh  Dr LEIGH: Following on from your question, Chair: does the tax bill that was paid relate to executive options?

Ms Chester: Not that I'm aware of. We'll have to take that question on notice.
Hansard, p. 45
23 October 2020
(11 November 2020)
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ASIC40QW Wilson Prior to ASIC’s appearance before the House of Representatives Standing Committee on Economics on Friday, 23 October 2020 did ASIC Deputy Chair, Karen Chester, or any other Commissioner have any discussions directly or indirectly with Andrew Leigh MP, or his office, on that day regarding matters that arose at the hearing? Written (16 December 2020)
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ASIC41QW Leigh 

Regarding the case ASIC v Mitchell (No 2) [2020] FCA 1098:

(a) What is ASIC’s view of Beach J’s decision to call Mr McWilliam as a witness?

(b) In ASIC’s view, how did Beach J calling Mr McWilliam impact the outcome of the case?

(c) Does ASIC believe that the case established any precedents that might significantly impact future civil penalty proceedings brought by ASIC?

Written (7 December 2020)
(PDF66KB)
ASIC42QW Leigh 

Does ASIC stand by the proposition, which it pursued in the case ASIC v Mitchell (No 2) [2020] FCA 1098 (Court Transcript, 2 December 2019, p. 1239), that Mr Healy made statements in his examination by ASIC which were inconsistent with the evidence he gave in court? If so:

(a) What is ASIC’s view of Beach J’s decision (Court Transcript, 2 December 2020, p. 1314) to not allow ASIC to use the excerpts of the transcript of Mr Healy’s examination by ASIC?

(b) Does ASIC intend to pursue Mr Healy for making a false or misleading statement to ASIC or for giving a false statement to the court? If not, why not?

Written (7 December 2020)
(PDF62KB)
ASIC43QW Leigh 

Does ASIC intend to submit an appeal in regards to ASIC v Mitchell (No 2) [2020] FCA 1098? If not:

(a) What are ASIC’s reasons for not submitting an appeal?

(b) Does ASIC hold the view that the prospects of success for an appeal are low?

(c) Which commissioner/senior executive at ASIC made the decision not to submit an appeal?

(d) Did ASIC consider submitting an appeal on the grounds that Beach J did not ultimately, in his judgement, provide his reasons for excluding Mr Healy’s evidence, as he had undertaken to do? If not, why not?

Written (7 December 2020)
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ASIC44QW Leigh 

On 14 September 2020, an article in the Sydney Morning Herald Former Tennis chief Healy says ASIC tried to turn him against Harold Mitchell’, reported that Mr Healy revealed details of a settlement offer he had received from ASIC.

(a) Were the settlement discussions ASIC held with Mr Healy, which are referred to in the article, confidential?

(b) If so, does ASIC intend to take any action against Mr Healy for publicly disclosing privileged discussions about settlement? If not, why not?

Written (7 December 2020)
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ASIC45QW Wilson A constituent has contacted me in regards to the issuing of capital as shares by Australian listed companies and noted the below. What is ASIC’s view on this statement?

“I have read recently that the ASX & ASIC last week lifted the percentage of shares an Australian listed company can issue out as capital in a placement from 15% to 25%. These shares are bought at a discount by institutions who are favoured clients of the underwriting investment bank appointed by the issuing company. Retail shareholders and SMSF’s are excluded from this process. They may be able to participate in a share purchase placement at a later date, however even if they do their shareholding becomes diluted and low limits usually apply to these share purchase placements. If they are unable to participate in the placement because they don’t have the funds their position obviously becomes even worse. I understand in the UK the limit on these placements for companies is 5% of their share capital. I suggest the government closely scrutinize this and adopt the UK position. This certainly doesn’t pass the pub test particularly at a time when many small shareholders are struggling to stay afloat”.
Written (21 December 2020)
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Committee Secretariat contact:

Committee Secretary
Standing Committee on Economics
PO Box 6021
Parliament House
Canberra ACT 2600

Phone: (02) 6277 4587
Fax: (02) 6277 4774
economics.reps@aph.gov.au

About this inquiry

The Standing Committee on Economics, which can inquire into and report on any annual reports referred to it by the House of Representatives, has agreed to undertake an inquiry into the Australian Securities & Investments Commission Annual Report 2019.



Past Public Hearings

23 Oct 2020: Canberra
05 Aug 2020:

more...

Inquiry Status

Current

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